Mark begins the weekly webinar by discussing any updates he has on the economy and current state of the markets. He also provides commentary on how he thinks you can best position yourself in the market going forward based on current trends. He ends the webinar with his Financial 15 where he discusses a special financial planning topic. This week, the topic is Should You Rollover Your 401k.
Should You Rollover Your 401(k)?
The topic of rolling over your 401(k) is a huge one and there is an abundance of resources out there that Mark encourages listeners to dig into if they’re considering a 401(k) rollover. However, he takes time to discuss the main points that he thinks you should keep in mind as you think about this move.
- Tax-free transfer. If you roll over your 401(k), know that it’s a tax-free transfer. You want to do a direct transfer to an IRA. If you encounter someone who talks about having to withhold a specific percentage due to paying taxes on the rollover, then Mark encourages you to speak with someone else because there shouldn’t be any taxes paid on a 401(k) rollover.
- Fees and costs. Just like there are fees and costs in your 401(k), there will be fees and costs in your IRA as well. Be sure that you take the time to properly calculate how many fees and costs are involved with both accounts which will come into play at the time of your transfer.
- Flexibility. A benefit of a 401(k) rollover is flexibility. You have the flexibility of investments, and often your 401(k) account holder will provide investment management. For many IRAs, you’ll have to get your investment advice outside of the account.
- Access. The access you have to funds in a 401(k) is extremely limited compared to the access you’ll have to an IRA in retirement. This is because you can make your own distributions with an IRA, but there are many hurdles you have to jump over when it comes to getting money out of your 401(k).
- Roth Conversions. With an IRA, you’ll have the opportunity to do a Roth conversion whenever the timing works for you. This is something that you won’t be able to take advantage of with a 401(k). This allows you to better plan out your tax strategy so that it works with your overall financial plans.
- NUA. This stands for Net Unrealized Appreciation – this is when you have a company stock in your 401(k) plan, it may be smart for you to distribute that stock into a non-IRA account. This gives you the ability to pay ordinary income tax on the cost basis, but you capital gains tax on any growth on that company stock.
- Backdoor Roth IRA Contribution Considerations. Before rolling over the funds in your 401(k) to a Roth IRa, it’s important to note that in doing so, you’ll completely mess up your opportunity to do Roth IRA contributions.
- Age 55 Rule. In most cases, you can’t access the funds in an IRA until you’re 59 ½. However, if you retire at the age of 55, you can access the money in your 401(k) without penalty.
Still Working Rule. If you roll your 401(k) into an IRA and you’re still working at the age of 73, you’ll begin having to take out RMDs. This same rule doesn’t apply for 401(k)s, so if you plan on working til later in life, it may be a smarter idea to keep your money in your 401(k) to avoid having to take out RMDs once you hit 73.
Each Tuesday at 10:00 a.m. (except Tuesdays that follow Market Holidays), I hold a Live Webinar where I discuss recent headlines, IRA and retirement issues from the Ed Slott Group, market updates, and analyst reports, and a timely Financial Planning strategy or technique.
This week I discuss when and if you should roll your 401(k) or other retirement plan to an IRA. I review the pros and cons to consider before rolling over your plan.
Please don’t hesitate to email us with any questions you have or if you’d like to schedule an appointment with us. You can reach us at questions@attleborowealth.com.
Each webinar is indexed so you can jump to the section that interests you most or watch the entire broadcast.
Mark Byelich is a Certified Financial Planner™ practitioner and also holds the Accredited Investment Fiduciary® designation. He is a member of Ed Slott’s Master Elite Advisor Group. This exclusive group is comprised of nearly 400 of the nation’s top financial professionals who are dedicated to the ongoing training and mastery of advanced retirement account and tax planning laws and strategies.
Mark is committed to education and professional development in the financial services field and has been asked to speak by major news organizations and to his peers around the country about financial planning strategies.
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The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Attleboro Wealth Management, LLC is a Registered Investment Adviser. This program is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Attleboro Wealth Management, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Attleboro Wealth Management, LLC unless a client service agreement is in place.
